Corporate reporting on climate change risks is inadequate

Corporate investors’ reporting on the physical risks posed by climate change is “limited, incomplete and inadequate” according to recent research.

A new 16-page study Harnessing climate data: Advancing data analytics to better integrate physical risks and opportunities has found that climate-related extreme weather events have resulted in extensive loss of life and caused billions in economic damages globally – often without adequate insurance coverage.

The study carried out by the National Employment Savings Trust, Oxford Sustainable Finance Group and UBS Asset Management said extreme weather events linked to climate change, such as unprecedented heatwaves, wildfires, floods and droughts have resulted in extensive loss of life and caused billions in economic damages globally, often without adequate insurance coverage.

Notable examples include typhoon Hagibis in Japan in 2019, which caused around 100 deaths and $10bn in damages. According to one estimate it was made 67% more likely by climate change.

The 2021 floods in Western Europe, intensified by climate change, led to over 220 deaths and billions in infrastructure damage.

The 2023 wildfires in Canada, which burned over 13m ha, were worsened by climate change and resulted in widespread economic losses.

In 2024, over 1000 people were killed and millions displaced by unprecedented rains and flooding in Spain and Western and Central Africa, weather patterns likely exacerbated by climate change.

The analysis of company disclosures also revealed “significant variability and a lack of standardisation” in reporting on the effects of and preparedness for physical risk events.

The current state of data, methodologies and disclosures, along with the limitations of climate modelling and physical risk analytics, are hindering investors from integrating physical risk analysis into their portfolios, the analysis said. This is particularly the case in public market portfolios, where investors have less visibility and control over management decisions according to the research paper.

The study has called for more third-party analytics to bridge the information gap by using risk models to assess different climate scenarios. Such data can offer insights on the financial effects of acute and chronic physical risks on assets, informing investors’ decisions about portfolios the study said.